If you're an Australian employee, there's a legal way to pay less tax every fortnight — and most people aren't using it to its full potential. It's called salary sacrifice, and depending on your income and what you sacrifice, it could save you thousands of dollars a year.
The catch? The maths gets complicated fast. That's why we built a free salary sacrifice calculator for Australia — but first, let's make sure you understand what you're actually calculating.
What Is Salary Sacrifice?
Salary sacrifice (also called salary packaging) is an arrangement between you and your employer where you agree to receive less take-home pay in exchange for non-cash benefits. Because the sacrifice comes out of your pre-tax salary, you pay less income tax and Medicare levy.
The ATO allows salary sacrifice for a range of items. The most common in the private sector:
- Superannuation contributions — the most widely used, especially for high earners
- Novated car leases — bundle your car, fuel, insurance, and maintenance into one pre-tax payment
- Laptop or work-related technology — up to $300 in some cases without Fringe Benefits Tax (FBT)
- Work-related expenses — tools, uniforms, professional memberships
For employees of hospitals, charities, and certain not-for-profit organisations, the rules are even more generous — you can sacrifice up to $15,900 per year on living expenses completely FBT-free.
How the Tax Saving Actually Works
Let's say you earn $90,000 per year. Your marginal tax rate is 32.5% (plus 2% Medicare levy = 34.5% effective on that portion).
If you sacrifice $10,000 into super:
- Old taxable income: $90,000
- New taxable income: $80,000
- Income tax saving: approximately $3,450
- Super contributions tax: $1,500 (15% on $10,000)
- Net saving: roughly $1,950 per year
That's nearly $2,000 back in your pocket — or rather, in your superannuation — just by having the conversation with your HR department.
At higher incomes the saving is larger. On $130,000, your marginal rate is 37% + Medicare = 39%, so the same $10,000 sacrifice saves you about $2,400 net of the 15% super contributions tax.
The Super Contributions Cap
Before you start sacrificing everything into super, note that the concessional contributions cap for FY2025–26 is $30,000 per year. This includes employer SG contributions (currently 11.5%).
So if your employer contributes $10,350 (11.5% of $90,000), you can sacrifice up to $19,650 more before hitting the cap. Exceeding it means the excess is taxed at your marginal rate — which defeats the purpose.
Novated Leases: Is the Maths Worth It?
A novated lease is a three-way agreement between you, your employer, and a finance company. You bundle pre-tax and post-tax dollars to cover the full running cost of a car. The FBT issue is handled through post-tax contributions under the employee contribution method.
Example: A $45,000 car on a 3-year novated lease might cost ~$500/fortnight from your gross salary, versus ~$650/fortnight if you bought and financed it with after-tax dollars. That's a saving of around $3,900 per year — plus GST savings on the purchase price.
The numbers vary significantly based on the car, how much you drive, your income, and your employer's novated lease provider fees. That's why the CalcFuel salary sacrifice calculator lets you model your actual numbers.
Who Benefits Most From Salary Sacrifice?
High earners (above $120,000): Your marginal rate is 45% + Medicare. Every dollar sacrificed to super saves you 30 cents net of super tax. Well worth doing up to the cap.
Middle-income earners ($45,000–$120,000): Still beneficial, but the maths is tighter. Focus on super sacrificing where you have capacity, or use a novated lease if you genuinely need a new car anyway.
Not-for-profit / healthcare workers: The FBT exemptions here are genuinely exceptional. If you work for a public hospital or registered charity and you're not salary packaging, you're leaving several thousand dollars on the table every year.
Employees buying a new EV: Since 1 July 2022, eligible electric vehicles under the luxury car tax threshold are exempt from FBT when provided via novated lease. This has made EVs dramatically more attractive for Australian employees.
What Salary Sacrifice Does NOT Help With
- Casual workers and those on very low incomes: If you're already in the lowest tax bracket ($18,201–$45,000, 16% marginal rate from FY2025), the super sacrifice benefit narrows significantly. The Low Income Super Tax Offset (LISTO) helps, but the net gain is modest.
- Already-maxed super contributions: Once you hit the $30,000 concessional cap, additional super sacrifice gets taxed at your marginal rate — worse than doing nothing.
- Items with high FBT exposure: Some benefits trigger Fringe Benefits Tax at 47%, which can exceed the income tax saving. Always check the FBT treatment before arranging a new benefit.
How to Set It Up
- Check your employment agreement. Some awards and contracts prevent salary sacrifice arrangements.
- Talk to HR or payroll. Most large employers have existing arrangements with super funds and novated lease providers.
- Get the arrangement in writing before the pay period starts. You cannot retrospectively sacrifice salary you've already received.
- Review annually. The concessional cap, your income, and your employer's SG contributions all change — what was optimal last year might not be this year.
Try the Free Calculator
Stop guessing and run your actual numbers. The Australian Salary Sacrifice Calculator at CalcFuel lets you enter your gross salary, the amount you want to sacrifice, and instantly see:
- Your current take-home pay vs. your post-sacrifice take-home pay
- The annual tax saving
- How that sacrifice impacts your super balance over time
No email required. No signup. Just the numbers.
Browse all our free financial calculators at CalcFuel.com — including mortgage repayment, compound interest, GST, and more.
This article provides general information only and does not constitute financial or tax advice. Tax rules change frequently — consult a registered tax agent or financial adviser for advice specific to your situation.
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